A recent study by the investment firm, Lazard Partners, of more than 200 healthcare executives and 80 healthcare investors, underscores the development of value-based care business models as a transformation in the making. So what is the impact for pharma?

The report points out that these new business models are a response to intense pricing pressure that is challenging healthcare companies across sectors and geographies. Almost half of the healthcare C-level executives surveyed said that the adoption of value-based or risk-sharing pricing models as transformative over the next 5-10 years, compared to 38% who cite scientific breakthroughs. DCAT Value Chain Insights examines the implications for the pharmaceutical industry.

A transformation in the making
The survey was conducted to C-level executives and investors in the US and Europe across three sectors: pharmaceuticals and biotech; medical devices/technology and diagnostics; and healthcare services. The study showed strong sentiment that the industry is being transformed by the development of value-based care business models, which would displace traditional fee-for-service pricing. These new business models are a response to the intense pricing pressure that is challenging healthcare companies across sectors and geographies.

“Healthcare business leaders told us that their single biggest challenge is pricing pressure, and this is driving innovation, both in science and in new business models,” said David Gluckman, Global Co-Head of Lazard’s Healthcare Group, in commenting on the study. “They also expect to meet the challenges with greater levels of M&A, partnerships and collaboration, including with non-traditional competitors.” “We’ve seen what business model disruption has done to other industries,” said Peter Orszag, Global Co-Head of Lazard’s Healthcare Group, who also commented on the study. “The rise of value-based care may prove to be the great disrupting force in healthcare.”

Key findings from the study are that non-traditional pricing models may transform healthcare more than science over the next decade: almost half (47%) of healthcare C-level executives cite the adoption of value-based or risk-sharing pricing models as transformative over the next 5-10 years, compared to 38% who cite scientific breakthroughs.

Almost one-third of respondents in medical devices/tech/diagnostics and in healthcare services believe that non-traditional competitors will have a transformative impact on the industry in the next three to five years.

Healthcare executives most frequently cited M&A, industry partnerships and collaborations, including with non-traditional competitors, as enabling the transformation of the industry over the next 5-10 years.

More than half of respondents expected an increase in acquisitions of public companies over the next 18 months, and more than two-thirds expected an increase in private company acquisitions.

The Global Healthcare Leaders Study surveyed 213 C-level executives and 87 healthcare investors. C-level executives included CEOs, CFOs, and senior executives involved in strategic decision-making. Respondents were chosen to represent a statistically significant mix between the US (203); Europe (88); and other regions (9), except for the healthcare services respondents, who were all US-based.